Sensex, Rupee Set to Rally as Fed Holds Rates Near Zero

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Indian stock markets and the rupee are likely to rally on Friday, following the Federal Reserve’s decision to keep interest rates near zero. Nifty futures traded on the Singapore Exchange were up 0.7 per cent as of 11.50 p.m., indicating a solid start for domestic equities.

The US central bank said an array of global risks and other factors convinced it to delay what would have been the first rate hike in nearly a decade. It left open the possibility of a modest policy tightening later this year.

Stocks and bonds rallied in the US post the Fed’s statement. The Dow Jones index rose as much as 193 points, or over 1 per cent, in a volatile session.

The dollar, however, fell to a three-week low against a basket of currencies. Commodities priced in the dollar gained strength tracking weakness in the dollar. Gold prices rose to two-week high post Fed’s announcement.

The weakness in the dollar will help the rupee, which has lost 4 per cent against the greenback in the last month.

Fed’s decision is likely to halt the exodus of foreign funds from domestic equities, analysts say. The prospect of a rate hike in the US had led foreign investors to sell equities worth Rs 20,000 crore since August 1. This has resulted in 8 per cent correction in the Sensex. Indian markets have fallen sharply despite aggressive buying by domestic funds.

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